reliance industries limited challenges, opportunities, strategies & new paradigms
TRANSCRIPT
2
Forward Looking Statements
This presentation contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or other words of similar meaning. All statements that address expectations or projections about the future, including, but not limited to, statements about the strategy for growth, product development, market position, expenditures, and financial results, are forward-looking statements.
Forward-looking statements are based on certain assumptions and expectations of future events. The companies referred to in this presentation cannot guarantee that these assumptions and expectations are accurate or will be realised. The actual results, performance or achievements, could thus differ materially from those projected in any such forward-looking statements. These companies assume no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events, or otherwise.
3
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
4
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
5
Key driver of world’s energy demand growth – Emerging Asia
India is one of the key players of Emerging Asia
World Economy expected to treble from US$ 47 Tn in 2002 to 113
Tn by 2025.
Emerging Asia accounts for 48% of the increase
The world’s population is set to increase from 6.3 Billion to about
7.9 Billion
Emerging Asia accounts for 50% of the increase
World’s energy needs set to increase from 10, 300 to 16,125
MTOE
Emerging Asia accounts for 46% of the increase
Oil and Gas to account for 64% of the increase in
consumption
6
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
7
Energy producing and delivery systems are stretched
Supply Side measures are a key to solve the energy
related issues
Little surplus capacity in major oil producing nations Geopolitics, accidents and weather related incidents resulting in
supply disruptions Global Refining Capacity is stretched Futures markets indicate higher prices Resultant high oil and Gas prices impact the entire energy space
8
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
9
“Easy Oil” over
Rising f&d costs; last ten year average $7.44/boe as against $11.37/boe in 2005
Exploration outlays on decline, E&P spending directed towards existing producing wells rather than exploration thru drilling new wells
Reduction in discoveries in the last few years, the average size of new discoveries around the world has declined three-fold to about 22 mmboe
Low hanging fruits already plucked, new reserves are in difficult
logistics, unconventional plays, adverse fiscal regimes, politically
unstable geographies
10
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
11
Heightened competition
National Oil Companies (NOC) are aggressively increasing their share of reserves worldwide, resulting in less share for IOCs
Additionally, competition from smaller oil companies leading to higher acquisition costs
NOCs striving for national supply-security, easily outbid IOCs
acquiring solely on “hurdle rates”
National Oil Company International Reserves in mmboe
1998 2004
Petronas, Malaysia 2000 6288
Statoil, Norway 700 888
Petrobras, Brazil 298 1251
CNOOC, China - 647
ONGC, India - 1459
12
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
13
Sustainable development gaining emphasis
Global warming will have serious consequences of
rising sea levels, species extinction, epidemic disease,
drought and severe weather events.
– In 50 years, greenhouse emissions must be reduced by 60
percent.
In 5 to 15 years carbon exposure management could
create or destroy shareholder value.
Carbon regulation, will raise costs across the
globe
Carbon Trading has become a reality A lower carbon footprint should be woven in into every
greenfield project
14
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
15
Need for new energy pathways
Technological innovations key to commercially tap “hard
oil”/ “unconventional oil” and other abundant energy
sources
R/P ratio for oil and gas is declining, currently close to 40 years for oil and 65 years for gas
Iran and Russia contributed to increased reserves, which are difficult to access
R/P for Oil
0102030405060708090
NorthAmerica
S. & Cent.America
Europe &Eurasia
Middle East Africa Asia Pacific
R/P for Gas
0
50
100
150
200
250
300
NorthAmerica
S. & Cent.America
Europe &Eurasia
Middle East Africa Asia Pacific
16
Advanced technological solutions
New technologies expanding the existing frontiers
Integrated bitumen processing for syn-crude generation
SAGD (Steam Assisted Gravity Drainage) for tar sands
Latest technology in deepwater drilling and drilling tools
Technology to reduce exploration risks
Gas hydrate production
Biomass, Coal to Liquid, Integrated Gasification Combined
Cycle etc.
17
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
18
Energy Challenges
India – the fifth largest energy consumer
Energy demand estimated to grow by 40% in 5 years
Widening Demand-Supply Gap
Energy volatility affects economy considerably
Funding of US$ 225 Bn by 2012; Government ?? Any takers ?
It is not just energy….It is “affordable energy”
19
Energy Challenges
Industries faced an average of 17 power shutdowns a month (2005)
Investment in transmission & distribution upto 2012 is US$ 40 Bn
Nuclear Power is long term and needs support
Electricity generation must go up by 90 GW in 7 years. Equal to wiring up the entire United Kingdom.
The new power infrastructure estimated at US$ 170 Bn
20
Energy Resources Gap*
Deficit Supply
*Source: McKinsey
Energy in MTOE 2005 FY 2012Coal 16 25-85
192 250Oil 86 125
35 40Natural Gas 6 20-25
26 50Overall 105 175
270 375
21
Coal
Supply – Demand gap expected to be 100 million tonnes in 2012
Govt monopoly in coal production – short of targets Commitment to power plants down to 89% from 96% two years
ago Needs US$ 10-15 Bn for upgradation / new mines Opex is 50% higher – needs newer technologies
15% drop in commitment shaves off 1% in growth rate
Major investments for infrastructure – US$ 45 - 50 Bn
Market related coal price
22
Oil & Gas
32 33
4560
96110
195
368
0
50
100
150
200
250
300
350
400
2001-02 2002-03 2011-12 2024-25
million
ton
nes
Production
Demand
2472
4273 4979 4979
5332
8158
11053
13807
0
2000
4000
6000
8000
10000
12000
14000
16000
2001-02 2007-08 2011-12 2024-25
MM
SC
FD
Supply
Demand
Oil Projections Natural Gas Projections
Demand supply gap for Oil may rise from current ~70% to well over 80% levels, in next 20 years
Demand supply gap for Gas may climb up from ~50% to over 60%
Source: ORF Energy Monitor, 23-29 Nov, 05 Source: ORF Energy Monitor, 23-29 Nov, 05 and Reliance
Demand and Supply Side measures to create Interim
Petroleum Security
23
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
24
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
25
Emerging Imperatives for India
Strengthen Energy Security
Accelerate domestic E&P
Policy Measures for supply/ demand management
Strengthen Delivery Infrastructure
Investments required in Refining / Power /Pipelines
Thrust on Renewable /Alternate Fuels
Coal /Nuclear Power / Bio Fuels / Gas hydrates
Use of new technologies
26
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
27
Textiles Polyester PlasticsPetroleum Downstream
PetroleumUpstream
Reliance – Business Segments
Vertical integration, participation in sectors with strong growth potential and international competitiveness
1970s 1980s 1990s 2000s
RetailGasPipelines
Infrastructure
28
Consistently Accelerating Growth
( US $ million)
India’s first and only private sector company to feature in the Fortune Global 500 list
10
years
CAGR
28%
18% 29%
32%
FY 2005 FY 2006
Revenue
s 16,72519,97
6
Net Profit 1,7312,03
3
5 years
29
Reliance Philosophy
• Invest in businesses for future
• World scale
• Best technology
• Best people
• Integration
• Superior Project Execution
• What is good for India is good for Reliance
Reliance benchmarks itself with global best practices in all aspects of its operations
30
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
31
Reliance Vision
India Energy Imperatives Reliance Initiatives
Strengthen Energy Security
~ Accelerate domestic E&P
~ Policy Measures for overseas Investment
Strengthen Delivery Infrastructure
~Investments required in Refining / Power /Pipelines
Thrust on Renewable /Alternate Fuels
~ Coal /Nuclear Power / Bio Fuels
Sustainable development
Expanding Upstream in India & Abroad
~ Extensive E&P in India
~ International Acquisitions
Expanding Delivery Infrastructure
~ Refining / Pipelines / Retail
Energy Convergence
Renewable /Alternate Fuels
Managing Carbon exposure
32
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Nuclear
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
33
Extensive Exploration Acreage in India
A diversified and balanced portfolio
Producing Assets – 30% Interest in 90,000 BOEPD Panna-Mukta & Tapti fields
Exploration Blocks - 34 blocks in India
Exploration Area - about 350,000 sq.km, Predominantly in deepwater
Coal Bed Methane - 5 blocks (4,000 sq.km.)
Reliance holds about 10% of country’s sedimentary basin and has the largest private sector exploration acreage
34
International Acquisitions – Current positions
OMAN
YEMEN
COLOMBIA
21,140 square km
2,464 square km
15,718 square km
East Timor
Sunri
se
Bayu - Undan
JPDA
Area
TIMOR LESTE
2,380 square km
35
International Acquisitions – Vision
2020
One of Top 10 Global Companies (pvt +
govt.)
Production :
Overseas Reserves :
~250,000 bopd
~1,500 mm bbl
2015
2006
Production (bopd) :
Prod Growth (CAGR) :
Overseas Reserves :
~500,000
~15%
~3 bn bbl
Near Term Aspirations
Top Pvt. Oil Company of
Asia
One of Top 10 Global Pvt. Oil Companies
36
Largest Gas Discovery in the World in 2002 -Initial
estimates of the gas in place is upward of 14 tcf
Gas Discovery established India as a world class
destination
Expected to be on production in 2008 which would
double India’s Gas Production
Proposed East West Pipeline to evacuate Gas from KG
basin is amongst the longest cross country pipelines
in India
Proposed Pipeline will link key demand and supply
centres
Extensive City Distribution networks planned for
domestic, industrial and commercial sectors
Gas Chain strategy - India
Gas Find ushering in a supply coordinated demand growth story in India
37
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
38
Proposed Refinery at Jamangar
A 580,000 barrels per day stand alone refinery
A 0.9 million tonnes per annum Polypropylene plant
‘Intelligent’ repeat design to optimize project cost and
construction schedule
Project expected to be commissioned in 2008
39
Jamnagar: Refining Hub of the World
Source: Oil and Gas Journal458,000
493,500
495,000
520,000
557,000
580,000
605,000
660,000
817,000
940,000
650,000
0 200,000 400,000 600,000 800,000 1,000,000
Shell Eastern, Singapore
Exxon Mobil, Baton Rouge, USA
Hovensa LLC, Virgin Islands
S-Oil Corp, South Korea
Exxon Mobil, Baytow n, USA
RPL's Proposed Refinery
Exxon Mobil, Singapore
LG -Caltex, South Korea
Reliance Industries, India
SK Corp, South Korea
Paraguana Refining, Venezuela
BPD
RIL – RPL combine to be the largest
refinery complex in the world
RIL Group, India 1,240,000
40
A World Class Asset
One of the highest complexity index of more than 14
Process more than 60 crude varieties, with API
ranging from 16-51
Diversified crude sourcing strategy
Crude API Range Region
Light Crudes 33 - 51 Middle East Medium Crudes 22 - 33 Middle East Heavy Crudes < 22 West Africa / Latin America / ME
Growing light - heavy crude differentials offer promise for complex refineries
41
Superior Performance
Benchmarked in the top quartile, in all performance parameters
by Solomon Associates, in 2003
Adjudged the “Most Energy Efficient Refinery” by Shell Global
Solutions in 2004
First in Asia to be awarded the “International Refiner of the
Year” in 2005, by the Hart’s World Refining and Fuels
Conference
Globally acclaimed performance
42
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
43
Nationwide network of over 2000 outlets covering highways, cities and rural areas under implementation
Supply chain covering road, rail and ocean transport designed to minimize cost of placement
Entire network connected through “Broadband” enabling operational efficiency and delivery of superior customer value
A Reliance City Outlet
Reliance – Retail Marketing Network
State-of-the-art, pan India retail network with strong value propositions
44
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
45
Energy Convergence Solutions
Fuel Cells and Hydrogen technology can transform
energy space
Current usage restricted due to prohibitive costs
Large scale commercialization of fuel cells leveraging
– Extensive city gas distribution network
– Access to natural gas
– Partnerships with technology leaders
One stop solution for energy needs of electricity , cooling , heating and automotive fuels
46
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
47
Arid Land with poor water resources, poor biomass and
biodiversity and a Fragile mangrove based coastal
ecosystem
Planted 2.2 million trees representing 200 species over
2,000 acres for horticulture and agro forestry
Represents Asia’s largest Mango plantation – 2.5
million mangoes or about 450 MT
Mega Project implementation with virtually no
ecological disturbance
Embrace ecology and environment
Jamnagar experience to be leveraged for future projects
48
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
49
Bio-diesel Initiatives
Grow energy in agriculture
Integrate with CBM wherever possible
Focus on Jatropha and source better yielding varieties from
within and outside the country
Undertake large-scale production of high yield seeds
Achieve a capacity of 100,000 tonnes of biodiesel production
by 2011
Convergence of agriculture and energy
50
Outline
Emerging
Global Trends Energy Imperatives for India
Reliance
Response
Energy Challenges
Emerging
Imperatives
Reliance
Goal Congruence
E&P in India and Overseas
East West Pipeline
Refining in Jamnagar
Petroleum Retailing
Energy Convergence
Carbon Footprint
Bio Diesel
Coal
Emerging Asia – Key Driver of World Demand
Energy Producing and Delivery Systems are stretched globally
“Easy Oil” over
Heightened competition
Sustainable Development Gaining emphasis
Technology may hold answers for potential solutions
51
Coal Initiative
Coal accounts for a large portion of India’s Commercial Energy Consumption
Coal has become attractive on account of high oil and Gas Prices
New Coal Technologies address the related issues of high carbon emissions
Reliance to acquire a billion tonne of reserves